Trade CFDs on over 6,000 global markets including indices, shares, FX, commodities and more, with tight spreads on an award-winning platform
Benefits of CFD trading
Trade on both rising and falling marketsTake a position whatever direction the market moves
Hedge your portfolioUse CFDs to offset losses in an existing share portfolio.
Trade on marginPut down a small deposit to control a larger position in the market
Trade CFDs with City Index
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How to trade CFDs
1. Choose a CFD market
Decide which market you want to trade on. Get technical and fundamental analysis and trading ideas from our in-house experts
2. Decide to buy or sell
Click 'buy' if you think the price will increase in value or ‘sell’ if you think the market will fall in value
3. Select your trade size
Choose how many CFDs you want to trade
4. Add a stop loss
Manage your risk by placing an order to close your position at a predetermined price set by you
5. Monitor and close your trade
See your profit and loss updated in real time at the top of the screen. Exit your trade by clicking the close trade button
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CFD trading FAQs
How do CFDs work?
CFDs work using contracts that track the live prices of financial markets. When you trade one of these contracts, you’ll exchange the difference in the market’s price from when you open your position to when you close it. You can buy CFDs to open a long position or sell them to go short.
For example, say you buy an Australia 200 CFD when the index is at 7100, then sell it at 7200. You’ll exchange the difference between 7100 and 7200, pocketing 100 points as profit. If the Australia 200 fell to 7000 instead, though, you’d lose 100 points.
Your total profit or loss is dictated by the number of contracts you buy or sell.
How do you calculate CFD profits?
To calculate CFD profits, you multiply the number of CFDs you have traded by the point value of each CFD – and multiply that figure by the number of points the underlying market has moved from when you opened your trade to when you close it.
If the underlying market has moved in your chosen direction, you earn that figure as profit. If not, you make a loss.
That might sound complicated, but it becomes much simpler in an example.
Buying a single Australia 200 CFD will earn you $1 for every point the index rises and lose you $1 for every point it falls, which means an Australia 200 CFD has a point value of $1. Buy 10 Australia 200 CFDs, and you’ll make $10 for every point the index rises – but lose $10 for each point it falls.
If the Australia 200 moves from 7100 to 7200, then it has moved 100 points. You’ve bought CFDs, so you profit if the index moves up, meaning your 10 CFDs make you a profit of (100 points * $10 point value) $1000.
If you’d sold 10 CFDs instead, you’d make the same figure ($1000) as a loss.
Of course, you’ll need to minus any overnight financing fees to get the net outcome from your trade.
How does CFD margin work
CFD margin works by only requiring you to hold a fraction of a trade’s total value in your account in order to open and maintain your position. However, your final profit and loss will still be based on the full size of your trade.
Trading $1000 of Amazon stock with CFDs, for example, might only require you to have $100 in your account as margin. But if that stock then increases to a value of $1100, you’ll make the full $100 as profit – the same as if you’d paid the full $1000. If the stock falls to $900, you still lose $100.
Essentially, in this example you’d have made $100 profit from an initial outlay of just $100, a gain of 100%. Without CFDs, you’d still have made $100, but you’d have paid $1000. Your gain would only be 10%, meaning the CFD margin has magnified your profits.
However, exactly the same effect applies to losses – which is why risk management is a key part of CFD trading.
Benefits of CFD trading
Ability to go long and short
With CFDs you can go long (buy) or short (short) on rising or falling markets. If you believe a market will increase in value, you’d take a long position (buy). You’d profit if the market price rises and lose if the price falls.
On the other hand, if you believe that a market will decline in value you can use CFDs to go short (sell). You’d make a profit in line with any fall in price (and a loss if the price increases).
Reduce your capital outlay using margin
CFDs are a leveraged product, which means you pay a small percentage of the total trade value to open your position, known as margin, rather than paying to cover the entire cost of your position.
For example, if a market has a margin requirement of 10% then you would need to have 10% of the full value of the trade in your account, as initial margin, to open the position.
Leverage is good news if the market moves in the direction that you expect, but it carries a high degree of risk if the market moves against you. In the same way that your profits are magnified, any losses will also be magnified, and you could lose more than your initial investment.
Hedge your portfolio
If you believe your existing portfolio may lose some of its value, you can use CFDs to offset this loss by short selling.
Let's say you hold $5000 worth of DBS shares in your portfolio. You can short sell the equivalent of $5000 worth of DBS shares through a CFD trade.
In the same way that your profits are magnified, any losses will also be magnified, and you could lose more than your initial investment.
Access global markets and 24-hour trading
CFD trading gives you access to a wide range of markets that would not otherwise be available to retail investors, all from one trading platform. You can speculate on the price movement of thousands of individual shares, indices, currencies and commodities , from across the globe.
It’s important to be able to access your account and trade whenever you want, wherever you are – so that you can take advantage of market volatility. So, we give you unrestricted access to your account 24 hours a day, 7 days a week.
Summary of differences between CFD trading and share trading:
|Feature||CFD trading||Shares dealing|
|Ability to go long – buy and take advantage of rising prices|
|Ability to go short – sell and take advantage of falling prices|
|Ability to hedge – go short and mitigate against potential losses in your shares portfolio|
|Leveraged trading – gain a large exposure for a fraction of the value|
|Immediate dealing – instant trading both in and out of a market|
|Access to other asset classes – such as indices, FX, etc|
|Access to global shares – trade over 6000 different markets from around the world|
|Receive dividend and interest adjustments|
|Physical ownership – benefits include the ability to attend AGMs|
|Pay overnight financing charge|